Question 1

Marginal cost must increase if the marginal product of the marginal resource decreases, this is because diminishing then raising marginal expenditures, represented by a U shaped curve results from an increment in declining marginal revenues (Baumol, & Blinder, 2015). Specifically, the declining marginal revenues occur due to the principle of diminishing marginal revenues. Therefore, the principle of declining marginal earnings impacts both the immediate manufacturing productions of a business entity and the gradual manufacture operations.

The connection between marginal cost and marginal product lies in the valuable production of additional items (Baumol, & Blinder, 2015). The marginal products fluctuate based on the amount of items a firm is currently manufacturing. The marginal product of work takes place when a firm hires more workers to meet the additional products.

2

 Productivity efficiency

Refers to a description that captures productivity verses efficiency and as a result bringing out quantity and quality (McConnell et.al, 2009). A productive corporate gives vital output although returns may take a negative toll if the quality of the item is poor or the demand for the product is low. In most cases, productivity and efficiency need meticulous planning from the managers’ side.

Efficiency entails comparing items manufactured or performance with amount a firm can produce without increasing resources. In other words, efficiency safeguards an industry from wastage (McConnell et.al, 2009). Depending on the organization, stakeholders prefer efficiency to productivity. However, their useful varies in terms of the situation.

 Allocative efficiency

Refers to the level of production where the value of an item or service is equal to marginal expenditures of manufacturing (McConnell et.al, 2009). Allocative efficiency occurs after a service or item achieves an ideal distribution protocols and when marginal expenditures and marginal functions are at par hence allocative efficiency.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Baumol, W. J., & Blinder, A. S. (2015). Microeconomics: Principles and policy. Nelson Education.

McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics: Principles, problems, and policies. Boston McGraw-Hill/Irwin.